Moody’s downgrades Kuwait

Moody’s Investors Service said it downgraded Kuwait’s long-term foreign- and local-currency issuer rating to A1 from Aa2 and changed the outlook to stable. Moody’s also trimmed Kuwait’s foreign-currency bond ceiling to Aa3 from Aa2 and the local-currency bond ceiling to Aa3 from Aa2.

The downgrades and outlook change conclude the review for downgrade started on March 30, the agency said.

“The decision to downgrade the ratings reflects both the increase in government liquidity risks and a weaker assessment of Kuwait’s institutions and governance strength. In the continued absence of legal authorization to issue debt or draw on the sovereign wealth fund assets held in the Future Generations Fund (FGF), available liquid resources are nearing depletion, introducing liquidity risk despite Kuwait’s extraordinary fiscal strength.

“And while the fractious relationship between parliament and the executive is a long-standing constraint on Moody’s assessment of institutional strength, the deadlock over the government’s medium-term funding strategy and the absence of any meaningful fiscal consolidation measures point to more significant deficiencies in Kuwait’s legislative and executive institutions and policy effectiveness than previously assessed,” Moody’s said in a press release.

Though liquidity risks are especially relevant in the near term, over the medium-term, upside and downside risks are broadly balanced reflected in the outlook, Moody’s said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.